It’s Happening: Wall Street Is Beginning to Turn on Trump

Donald Trump holds a meeting with members of his cabinet including Secretary of State, Rex Tillerson and Secretary of Defense, James Mattis in the Cabinet Room of the White House, March 13, 2017.

By Michael Reynolds/Pool/Getty Images.

Yes, the Dow Jones Industrial Average, and other U.S. stock markets, are still enjoying some uncontrollable exuberance in the wake of Donald Trump’s unexpected electoral victory. And, yes, Trump’s Washington is now teeming with former Wall Street bankers, especially with those who just happened to have Goldman Sachs on their resume. And, yes, Trump can’t seem to get enough of the political theater surrounding the countless corporate C.E.O.s, who once rolled their eyes at him and are now ferrying to Washington to kiss his ring. But make no mistake about it: the hand wringing about Trump’s presidency has started on Wall Street.

In the intervening months since November, Wall Street has largely been enamored of Trump, or at least the idea of how he could help them. Conversations around his ineptitude and sanity have generally been leavened by a sense that he would be an asset to the people who make money from money. “For the first time in—I don’t know, certainly post-crisis, maybe even longer—the prospect of actually having really pro-business policies is there,” one senior Wall Street executive told me. “I think that overrides a lot of the tweeting.” This person was referring to Trump’s avowed promises to lower corporate and individual taxes, deregulate much of the manufacturing and financial sectors of the economy, repatriate trillions of overseas corporate profits, and undertake a $1 trillion infrastructure program.

More recently, however, the conversation has turned to whether Trump’s early stumbles, and the tenuous nature of the political coalitions in Washington, will obviate his agenda. Last week, Goldman Sachs itself convened an internal forum about the very topic. Jake Siewert, Goldman’s global head of corporate communications, spoke with Michael Paese, the co-head of Goldman’s Office of Government Affairs, and Alec Phillips, the firm’s U.S. political economist. Paese said that many of Goldman’s clients, especially those outside the United States, were “trying to understand the Trump phenomenon” (we all are, Michael . . . ) and how they should compute “rhetoric versus reality.” Paese said that the Trump administration has been surprisingly “slow out of the gate” to “control the bureaucracy” and to “set policy.” He noted that by this time in 2009, the Obama administration had already passed legislation regarding the second tranche of the Troubled Asset Relief Program, or TARP, the $850 billion stimulus program, as well as the beginnings of Obamacare and cap and trade. “The ability for this administration to not only control the bureaucracy but set policy is more limited based on the slow pace,” he said. “And I think that’s affecting the ability to match rhetoric with policy and get it done sort of right in the first instance.”

Noting the fissures within the pugilistic Republicans on Capitol Hill, Paese also observed that Trump is finding it much more difficult than he anticipated to repeal and to replace Obamacare. He compared it to the old story of the dog that finally caught the car: “The Republicans had been running for a long time on repealing it, but replacing it is difficult.” In the end, Paese explained that Trump’s deregulation plans have already become the victim of the health-care imbroglio, and the president’s perplexing inability to finish staffing his government. “Personnel is policy,” he said.

For his part, Phillips was slightly more sanguine. He said he thinks there will be a corporate tax-rate cut coming. He predicted that it would fall from 35 percent to 25 percent, but not down to the 15 percent rate that Trump promised when he was a candidate. He seemed less sure about whether a personal income tax cut would make it through Congress. But, he cautioned, tax cuts—whether corporate or individual—have been pushed further down the legislative agenda, too. “It’s clearly a 2018 tax cut,” he said. “Maybe it gets enacted by the end of this year, but it’s going to be mainly a 2018 thing. Who knows? It could be a 2018/2019 story ultimately.”

Phillips also discussed what appears from a distance to be the awkward intermingling taking place as Trump, his family, and his neophyte team wade deeper into the Washington swamp. “People have met Trump and Trump’s met Washington,” he said. “And meeting Washington is dealing with these institutions. Getting things done no matter what president it is, whoever it is—a reformer, an establishment figure—is enormously difficult. Even when you have both houses of Congress, but you don’t have a Senate majority of 60—that kind of patience for statecraft is something Trump’s going to have to either learn happily or not. But I think that’s going to be a big challenge.”

This analysis is not limited to Goldman Sachs, which also issued a mildly trepidatious report to investors last month, despite the fact that its alumni committee seems to be running the country. A senior Wall Street banker, a Republican, also seemed concerned that Trump’s emotional stability had already steered him off the political agenda favored by the right’s donor class. “A lot of the early euphoria is wearing off,” he said. “And I think now it’s getting much more into the reality of what’s going to start to come from a policy standpoint. People are much more balanced and, in some cases, much more worried than they were in the immediate aftermath of the election, when it felt like it was going to be—even with some of the craziness of Trump’s behavior, his characteristics of tweeting and so forth—heading into Republican orthodoxy.”

Wall Street, of course, is singularly focused on making money. One of the ways it does that is to try to surmise which ways the political winds are blowing and set sail long before anyone else. But if the winds are blowing from multiple directions or sending them around in circles, the masters of the universe will dock their boats and get where they need to be some other way. “Now I think with all the trade comments and his focus on immigration and some of the things he’s done, the travel ban, I think the picture looks a lot more nuanced and mixed,” this senior banker continued. “While there is some Republican orthodoxy in there with lower tax rates and deregulation and so forth, this whole notion of border adjustment and some of the trade rhetoric is nerve-racking.” He continued, “The biggest danger with Trump is there’s so much rhetoric and people are reacting kind of short-term to the rhetoric and the policy is well behind the rhetoric. We don’t really know what the policy is.”

This executive conceded that, for the moment, he still takes some comfort from the people that Trump has around him, specifically Gary Cohn, the former president of Goldman Sachs who is now Trump’s chief economic policy adviser; Rex Tillerson, the former C.E.O. of Exxon who is now secretary of state; and James Mattis, the secretary of defense. “He’s put a fair number of very impressive people in place,” he said. “Now the question is: will he listen to them? Most of our clients seem to be comforted by the fact that there are some real adults in the room.” He also said he and his clients continue to trust in the institutions of government. “Because there’s good people there, and the institutions are strong, I think people are actually reasonably comfortable,” he said. Then he corrected himself. “That doesn’t mean that they’re completely comfortable.”

He said he and his clients would be “more comfortable” if, among other things, the president stopped tweeting. “All the stuff on taxes is pretty traditionally favorable for our client base,” he said. “But then you add the protectionism, and it’s pretty traditionally unfavorable for our clients. So that’s why people are less comfortable than they otherwise would be, because he’s kind of blending a series of Democratic principles with a series of Republican principles. He really did run against both parties, and you’re seeing that.”